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Long-Term Debt
 12 Months Ended
Dec. 31, 2011
Long Term Debt By Current And Noncurrent Abstract  
Long - Term Debt

(5) Long-Term Debt

 

As of December 31, 2011 and 2010, long-term debt consisted of the following (in thousands):

 

   2011 2010
Bank credit facility (due 2016), interest based on Prime and/or LIBOR plus an applicable      
 margin, interest rate at December 31, 2011 and December 31, 2010 was 2.9% and 4.0%, respectively $ 85,000 $ -
Senior unsecured notes, net of discount of $11.6 million and $13.5 million, respectively,       
 which bear interest at the rate of 8.875%   713,409   711,512
Series B secured note assumed in the Eunice transaction, which bore interest at the rate of      
 9.5%   -   7,058
     798,409   718,570
Less current portion    -   (7,058)
 Debt classified as long-term  $ 798,409 $ 711,512

Maturities. Maturities for the long-term debt as of December 31, 2011 are as follows (in thousands):

 

2012 $ -
2013   -
2014   -
2015   -
2016   85,000
Thereafter  725,000
Subtotal  810,000
Less discount  (11,591)
Total outstanding debt$ 798,409
   

Credit Facility. The Partnership made three amendments to its bank credit facility in May 2011, July 2011 and January 2012. The amendments contained the following changes:

  • Increased borrowing capacity from $420.0 million to $635.0 million;
  • Extended maturity from February 2014 to May 2016;
  • Increased the maximum permitted leverage ratio to 5.00 to 1.00;
  • Decreased the minimum consolidated interest rate coverage ratio during certain fiscal quarters;
  • Decreased the interest rates;
  • Permitted Apache Midstream LLC (“Apache”) to have a first priority lien on certain assets that are the subject of a joint interest arrangement between Apache and Crosstex Permian, LLC (“Permian”);
  • Increased the Partnership's ability to make investments in joint ventures and subsidiaries without such joint ventures and subsidiaries becoming guarantors under the credit agreement; and

  • Allowed the Partnership to use multiple banks as letter of credit issuers.

 

As of December 31, 2011, there was $85.0 million of borrowing and $69.0 million in outstanding letters of credit, under the bank credit facility leaving approximately $331.0 million available for future borrowing based on a borrowing capacity of $485.0 million. Based on the January amendment to increase the credit facility borrowing capacity to $635.0 million and borrowings outstanding as of December 31, 2011, the Partnership's available borrowing would be $481.0 million.

 

The credit facility is guaranteed by substantially all of the Partnership's subsidiaries and is secured by first priority liens on substantially all of the Partnership's assets and those of the guarantors, including all material pipeline, gas gathering and processing assets, all material working capital assets and a pledge of all of the Partnership's equity interests in substantially all of its subsidiaries.

 

The Partnership may prepay all loans under the credit facility at any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements. The credit facility requires mandatory prepayments of amounts outstanding thereunder with the net proceeds of certain asset sales, extraordinary receipts, equity issuances and debt incurrences, but these mandatory prepayments do not require any reduction of the lenders' commitments under the credit facility.

 

Under the credit facility, borrowings bear interest at the Partnership's option at the Eurodollar Rate (the British Bankers Association LIBOR Rate) plus an applicable margin or the Base Rate (the highest of the Federal Funds Rate plus 0.50%, the 30-day Eurodollar Rate plus 1.0%, or the administrative agent's prime rate) plus an applicable margin. The Partnership pays a per annum fee on all letters of credit issued under the credit facility and a commitment fee of 0.50% per annum on the unused availability under the credit facility. The letter of credit fee and the applicable margins for the interest rate vary quarterly based on the Partnership's leverage ratio (as defined in the credit facility, being generally computed as the ratio of total funded debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges, or adjusted EBITDA) and are as follows:

 

 

  Base Rate  Eurodollar Rate Letter of Credit
Leverage Ratio  Loans Loans  Fees
Greater than or equal to 4.50 to 1.00 2.00 %  3.00 %  3.00 %
Greater than or equal to 4.00 to 1.00 and less than 4.50 to 1.00   1.75 %  2.75 %  2.75 %
Greater than or equal to 3.50 to 1.00 and less than 4.00 to 1.00   1.50 %  2.50 %  2.50 %
Greater than or equal to 3.00 to 1.00 and less than 3.50 to 1.00 1.25 %  2.25%  2.25%
Less than 3.00 to 1.00   1.00 %  2.00 %  2.00 %

Based on the forecasted leverage ratio of 4.00 to 1.00 for 2012, the Partnership expects the margin for the interest rate and letter of credit fee to be in line with the applicable rates above. The credit facility does not have a floor for the Base Rate or the Eurodollar Rate.

 

The amended credit facility includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. The maximum permitted leverage ratio (as defined in the credit facility, but generally computed as the ratio of total secured funded debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges) is 5.00 to 1.00. The minimum consolidated interest coverage ratio (as defined in the credit facility, but generally computed as the ratio of consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges to consolidated interest charges) is as follows:

 

  • 2.25 to 1.00 for the fiscal quarters ending March 31, 2012 through June 30, 2013;

     

  • 2.50 to 1.00 for September 30, 2013 and each fiscal quarter thereafter.

 

In addition, the credit facility contains various covenants that, among other restrictions, limit the Partnership's ability to:

 

  • grant or assume liens;

     

  • make investments;

     

  • incur or assume indebtedness;

     

  • engage in mergers or acquisitions;

     

  • sell, transfer, assign or convey assets;

     

  • repurchase its equity, make distributions and certain other restricted payments;

     

  • change the nature of its business;

     

  • engage in transactions with affiliates;

     

  • enter into certain burdensome agreements;

     

  • make certain amendments to the omnibus agreement, or the Partnership's subsidiaries' organizational documents;

     

  • prepay the senior unsecured notes and certain other indebtedness; and

     

  • enter into certain hedging contracts.

 

The credit facility permits the Partnership to make quarterly distributions to unitholders so long as no default exists under the credit facility.

 

Each of the following is an event of default under the credit facility:

 

  • failure to pay any principal, interest, fees, expenses or other amounts when due;

     

  • failure to meet the quarterly financial covenants;

     

  • failure to observe any other agreement, obligation, or covenant in the credit facility or any related loan document, subject to cure periods for certain failures;

     

  • the failure of any representation or warranty to be materially true and correct when made;

     

  • the Partnership or any of its subsidiaries default under other indebtedness that exceeds a threshold amount;

     

  • judgments against the Partnership or any of its material subsidiaries, in excess of a threshold amount;

     

  • certain ERISA events involving the Partnership or any of its material subsidiaries, in excess of a threshold amount;

     

  • bankruptcy or other insolvency events involving the Partnership or any of its material subsidiaries; and

     

  • a change in control (as defined in the credit facility).

 

If an event of default relating to bankruptcy or other insolvency events occurs, all indebtedness under the credit facility will immediately become due and payable. If any other event of default exists under the credit facility, the lenders may accelerate the maturity of the obligations outstanding under the credit facility and exercise other rights and remedies. In addition, if any event of default exists under the credit facility, the lenders may commence foreclosure or other actions against the collateral.

 

If any default occurs under the credit facility, or if the Partnership is unable to make any of the representations and warranties in the credit facility, the Partnership will be unable to borrow funds or have letters of credit issued under the credit facility.

 

The Partnership expects to be in compliance with the covenants in the credit facility for at least the next twelve months.

Series B Secured Note. On October 20, 2009, the Partnership acquired the Eunice natural gas liquids processing plant and fractionation facility which included an $18.1 million series B secured note. The Partnership paid $11.0 million of principal on the series B secured note in May 2010 and paid the remaining $7.1 million in May 2011.

 

Senior Unsecured Notes. On February 10, 2010, the Partnership issued $725.0 million in aggregate principal amount of 8.875% senior unsecured notes (the “notes”) due on February 15, 2018 pursuant to Rule 144A and Regulation S under the Securities Act at an issue price of 97.907% to yield 9.25% to maturity including the original issue discount (OID). Net proceeds from the sale of the notes of $689.7 million (net of transaction costs and OID), together with borrowings under the credit facility discussed above, were used to repay in full amounts outstanding under the prior bank credit facility and senior secured notes and to pay related fees, costs and expenses, including the settlement of interest rate swaps associated with the prior credit facility. Interest payments on the notes are due semi-annually in arrears in February and August.

 

The indenture governing the notes contains covenants that, among other things, limit the Partnership's ability and the ability of certain of its subsidiaries to:

 

  • sell assets including equity interests in its subsidiaries;

     

  • pay distributions on, redeem or repurchase units or redeem or repurchase its subordinated debt (as discussed in more detail below);

     

  • make investments;

     

  • incur or guarantee additional indebtedness or issue preferred units;

     

  • create or incur certain liens;

     

  • enter into agreements that restrict distributions or other payments from its restricted subsidiaries to the Partnership;

     

  • consolidate, merge or transfer all or substantially all of its assets;

     

  • engage in transactions with affiliates;

     

  • create unrestricted subsidiaries;

     

  • enter into sale and leaseback transactions; or

     

  • engage in certain business activities.

 

The indenture provides that if the Partnership's fixed charge coverage ratio (the ratio of consolidated cash flow to fixed charges, which generally represents the ratio of adjusted EBITDA to interest charges with further adjustments as defined per the indenture) for the most recently ended four full fiscal quarters is not less than 2.0 to 1.0, the Partnership will be permitted to pay distributions to its unitholders in an amount equal to available cash from operating surplus (each as defined in our partnership agreement) with respect to its preceding fiscal quarter plus a number of items, including the net cash proceeds received by the Partnership as a capital contribution or from the issuance of equity interests since the date of the indenture, to the extent not previously expended. If its fixed charge coverage ratio is less than 2.0 to 1.0, the Partnership will be able to pay distributions to its unitholders in an amount equal to an $80.0 million basket (less amounts previously expended pursuant to such basket), plus the same number of items discussed in the preceding sentence to the extent not previously expended. The Partnership expects to be in compliance with this ratio for at least the next twelve months.

 

If the notes achieve an investment grade rating from each of Moody's Investors Service, Inc. and Standard & Poor's Ratings Services, many of the covenants discussed above will terminate.

 

The Partnership may redeem up to 35% of the notes at any time prior to February 15, 2013 with the cash proceeds from equity offerings at a redemption price of 108.875% of the principal amount of the notes (plus accrued and unpaid interest to the redemption date) provided that:

 

  • at least 65% of the aggregate principal amount of the senior notes remains outstanding immediately after the occurrence of such redemption; and

     

  • the redemption occurs within 120 days of the date of the closing of the equity offering.

 

Prior to February 15, 2014, the Partnership may redeem the notes, in whole or in part, at a “make-whole” redemption price. On or after February 15, 2014, the Partnership may redeem all or a part of the notes at redemption prices (expressed as percentages of principal amount) equal to 104.438% for the twelve-month period beginning on February 15, 2014, 102.219% for the twelve-month period beginning February 15, 2015 and 100.00% for the twelve-month period beginning on February 15, 2016 and at any time thereafter, plus accrued and unpaid interest, if any, to the applicable redemption date on the notes.

 

Each of the following is an event of default under the indenture:

 

  • failure to pay any principal or interest when due;

     

  • failure to observe any other agreement, obligation, or other covenant in the indenture, subject to the cure periods for certain failures;

     

  • the Partnership or any of its subsidiaries' default under other indebtedness that exceeds a certain threshold amount;

     

  • failures by the Partnership or any of its subsidiaries to pay final judgments that exceed a certain threshold amount; and

     

  • bankruptcy or other insolvency events involving the Partnership or any of its material subsidiaries.

 

If an event of default relating to bankruptcy or other insolvency events occurs, the senior unsecured notes will immediately become due and payable. If any other event of default exists under the indenture, the trustee under the indenture or the holders of the senior unsecured notes may accelerate the maturity of the senior unsecured notes and exercise other rights and remedies.